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[VIEWCAST.COM LOGO] Filed Pursuant to Rule 424(b)(3)
Registration No. 333-40630
PROSPECTUS
VIEWCAST.COM, INC.
UP TO 1,334,454 SHARES OF COMMON STOCK
UP TO 140,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
This prospectus relates to the sale from time to time by the selling
securityholders described in this prospectus of (i) up to 1,334,454 shares of
our common stock and (ii) up to 140,000 Redeemable Common Stock Purchase
Warrants ("Public Warrants"). Up to 988,889 of the shares of common stock are
issuable upon conversion of our 7% Senior Convertible Debentures Due 2004. Up to
89,000 of the shares are issuable upon exercise of a private warrant to purchase
our common stock. We offered and sold the Debentures and issued the warrant in
transactions completed on April 28, 2000, pursuant to Regulation S under the
Securities Act of 1933. The Debentures are currently convertible. The private
warrant becomes exercisable April 28, 2001. Up to 254,065 of the shares of
common stock covered by this prospectus are shares issuable to certain of the
selling securityholders upon exercise of certain of the Public Warrants included
in this prospectus and upon exercise of private warrants. The balance of the
shares of common stock covered by this prospectus, 2,500, are currently issued
and outstanding shares.
Each Public Warrant entitles the holder to purchase 1.074 shares of our common
stock at $4.50 per share, subject to adjustment under certain circumstances. The
Public Warrants are exercisable at any time through 5:30 p.m. (New York Time) on
February 3, 2002, unless we earlier redeem them. We may redeem all, but not less
than all, of the Public Warrants, at any time, upon notice of not less than
thirty (30) days, at a price of $.10 per Public Warrant, provided that the per
share closing price or bid quotation of our common stock, as reported on NASDAQ,
for any twenty trading days within a period of thirty consecutive trading days,
ending on the fifth day prior to the day on which we give notice of redemption,
has been at least 150% (currently $6.75, subject to adjustment) of the initial
public offering price per share of our common stock (which was $4.50). The
Public Warrants included in this prospectus are, as of the date of this
prospectus, issuable upon exercise of certain private warrants. There are
2,598,848 Public Warrants currently issued and outstanding by our company.
The selling securityholders may offer and sell the shares of common stock and
Public Warrants covered by this prospectus from time to time to purchasers
directly or through underwriters, dealers or agents. The price at which such
securities may be sold will be determined by market prices prevailing at the
time of sale or at negotiated prices. We will not receive any of the proceeds
from the sale of securities by the selling securityholders.
Our common stock and Public Warrants are traded on the NASDAQ SmallCap Market
under the symbols "VCST" and "VCSTW." On June 29, 2000, the last reported sale
price for our common stock and Public Warrants, as reported by NASDAQ, was
$3.594 per share and $1.938 per Public Warrant.
See "Risk Factors" beginning on page 6 to read about factors you should consider
before buying shares of our common stock or our Public Warrants.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY BODY HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
July 13, 2000
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WHERE YOU CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and other information with the Securities and
Exchange Commission (the "SEC"). You may read and copy any documents we file at
the public reference facilities of the SEC located at 450 Fifth Street, N.W.,
Washington, D.C. 20549. You may obtain information on the operations of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. Our SEC filings are
also available to the public from the SEC web site at http://www.sec.gov.
We have filed a registration statement on Form S-3 under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the securities
offered in this prospectus. This prospectus is a part of that registration
statement and does not contain all the information set forth in the registration
statement. You may obtain further information with respect to our company and
the securities offered by reviewing the registration statement and its exhibits.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC permits us to "incorporate by reference" certain information
into this prospectus. This means that we can disclose important information to
you by referring you to another document we have filed separately with the SEC.
The information incorporated by reference is considered to be a part of this
prospectus, except for any information that is superseded or modified by other
information that is set forth directly in this prospectus.
The following documents that we have previously filed with the SEC are
incorporated by reference into this prospectus:
1. Our Annual Report on Form 10-KSB for the fiscal year ended December
31, 1999, as amended by Amendment No. 1 thereto on Form 10-KSB/A;
2. Our Quarterly Report on Form 10-Q for the quarter ended March 31,
2000;
3. Our Current Report on Form 8-K dated May 5, 2000;
4. Our Proxy Statement dated June 30, 2000 for the annual meeting of
our shareholders to be held August 4, 2000, as amended by Amendment No. 1 on
Schedule 14A filed June 29, 2000; and
5. The description of our common stock and other securities under the
heading "Description of Securities to be Registered" in our prospectus, dated
May 23, 2000, included in another registration statement filed by us on Form
S-3, registration no. 333-35662, as such description may hereafter be amended by
any amendment or report filed for the purpose of updating such description.
All documents that we file pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
after the date of this prospectus and prior to the termination of the offering
of the securities by the selling securityholders, shall be deemed to be
incorporated by reference into this prospectus.
If statements in this prospectus or in our filings listed in (1)
through (5) above conflict or are modified or superseded by statements in
documents incorporated by reference in this prospectus in the future, the
statements in this prospectus and the filings listed in (1) through (5) above
are modified or superseded by the statements in the future filings.
We will provide you, at no cost, a copy of any or all of the documents
incorporated by reference, upon your request, in writing or by telephone, to us
at:
Laurie L. Latham, Chief Financial Officer
ViewCast.com, Inc.
2665 Villa Creek Drive, Suite 200
Dallas, Texas 75234
Telephone: (972) 488-7200
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You should rely only on the information contained in this prospectus or
that we have referred you to as being incorporated by reference in this
prospectus. We have not authorized anyone to provide you with information that
is different.
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ABOUT VIEWCAST
The following information is a summary. It may not contain all the information
that may be important to you. You should read the entire prospectus, including
the "Risk Factors" on page 6, and the financial statements and notes to those
statements and detailed information about our company, its business, operations,
and management, included in the documents we incorporate by reference in this
prospectus.
When we refer to our company in the prospectus, we mean to include all of
ViewCast.com, Inc.'s wholly-owned subsidiaries, unless otherwise indicated.
OVERVIEW OF OUR BUSINESS.
Our company enables video communication over the Internet and other
networks through vertically integrated components, systems, and turnkey solution
products and services. We are a leading global provider of enterprise-wide,
digital video communication products and services for both real-time and
on-demand applications. We provide innovative networked video solutions for both
digital and analog video communication systems with our Osprey(R) video capture
cards and codecs, ViewCast(R) Encoding and Streaming Video System and Viewpoint
VBX(TM) System products.
This year, we have added video content hosting services, and will
provide professional services to meet the growing demand from public and private
sector enterprises to add or extend video communications internally and
externally. One of our hosting services, "YourVideoOnTheWeb(TM)," is a consumer
product designed to allow home users and small businesses to add video content
to their web sites.
Our customers acquire our solutions and products to enhance
communication and productivity, reduce costs and increase customer service
within corporations, educational networks, healthcare facilities, financial
institutions and government agencies, as well as between those entities, their
customers, vendors and others with whom they may communicate. Our customers use
our products to enable them to broadcast video over computer networks (streaming
video), deliver video from web sites (on-demand streaming video), provide
interactive video communication (video conferencing), and distribute video
within a network. We market, install and support our products either directly or
through arrangements with leading original equipment manufacturers, system
integrators, leading resellers and application developers worldwide.
INDUSTRY BACKGROUND.
Technology has merged with current business dynamics causing
unprecedented potential for growth and revenue, an increased likelihood for
confusion, and new challenges to compete and sustain position.
Within this environment, we believe businesses will increasingly seek
expert support to reduce confusion and to present solutions to their business
challenges. We believe that video communication products and services will
increasingly be used to meet these business challenges.
OUR SOLUTION.
As a vertically integrated provider, we provide the following video and
media solutions to our customers:
o Technology -- Our technology provides us a competitive edge to
differentiate our products from those of our competitors and
increase our ability to develop customer driven applications.
o Products and Applications -- Our products consist of video
subsystems, such as capture cards and codecs for encoding, decoding
and streaming, and video systems solutions for digital and analog
video applications. We manufacture and distribute worldwide our
Osprey(R) video capture cards and codecs, ViewCast(R) Streaming
Video solutions and Viewpoint VBX(TM) Systems.
YourVideoOnTheWeb(TM) is a consumer product used to encode video
from a camcorder or VCR.
o Expertise and Services -- Our comprehensive video expertise enables
us to assist customers in identifying their communication needs and
determine appropriate media mechanisms for their business
requirements. Our professional service organization will complement
our sales engineering and training organization by offering broader
customer solutions and support services. A significant addition
will be our video content hosting service.
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OUR BUSINESS STRATEGY.
Our objective is to be the world's premier supplier of products,
services and solutions for networked video applications. Key elements of our
strategy include:
o extension of product offerings building on our leadership in the
streaming video market;
o provision of video communication system and application solutions;
o establishment of content hosting services;
o provision of professional services;
o expansion of our strategic partnerships;
o expansion of sales, marketing, and channel development efforts; and
o development of worldwide brand recognition.
OUR PRODUCTS AND SERVICES.
We currently provide and intend to expand the following product
families:
VIDEO SUBSYSTEMS VIDEO SYSTEM SOLUTIONS
Osprey(R) video capture cards and codecs ViewCast(R) Streaming Video
Viewpoint VBX(TM)
We are in the process of establishing the following new services:
PROFESSIONAL SERVICES CONTENT HOSTING SERVICES
Your Video On The Web(TM)
ViewCast Online(TM)
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CORPORATE INFORMATION.
Our company is a Delaware corporation, formed in February 1994. Our
principal executive offices are located at 2665 Villa Creek Drive, Suite 200,
Dallas, Texas 75234. Our telephone number is (972) 488-7200, and our web site is
located at http://www.viewcast.com. Information contained on our web site is not
a part of this prospectus.
PATENTS AND TRADEMARKS.
We hold a U.S. patent covering certain aspects of our compression
codec. In addition, we own the following registered trademarks and have applied
for trademark registration in the United States as indicated below:
WorkFone(R) YourVideoOnTheWeb(TM)
Osprey(R) Viewpoint VBX(TM)
ViewCast(R) QVideo(TM)
ViewpointPro(R) Mediapoint(TM)
PersonalViewpoint(R) Conference Wizard(TM)
Multimedia Access System(R) Envista(TM)
Call Wizard(R) Viewport(TM)
Compressed Pocket Video (CPV)(R)
SLIC-Video(R)
All other trademarks and trade names appearing in this prospectus are the
property of their respective owners.
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RISK FACTORS
You should consider carefully the risk factors described below before deciding
whether to buy our common stock or Public Warrants. The risks and uncertainties
described below are not the only ones that we face. If any of these risk factors
actually occur, our business could be adversely affected and the trading price
of our common stock and Public Warrants could decline. As a result of those
events, you could lose all or part of your investment. You should also refer to
the other information contained or incorporated by reference in this prospectus
in making your decision.
See also "Special Note Regarding Forward-Looking Statements."
WE HAVE SIGNIFICANT DEBT AND MAY NOT BE ABLE TO MEET OUR OBLIGATIONS.
As of May 31, 2000, we owed $2,408,827 under a secured line of credit
from which we can borrow up to $9,000,000 at an interest rate of 12%. Unless
extended, any debt we owe under the line of credit will be due on October 22,
2000. The entity lending us the money is controlled by one of our directors and
principal stockholders. On April 28, 2000, we issued and sold $4,450,000
principal amount of 7% Senior Convertible Debentures Due 2004 (the
"Debentures"). See "Selling Securityholders". We may incur additional debt in
the future to meet our working capital needs.
The debt we owe may effect our company in important ways, including,
but not limited to the following:
o we may not be able to obtain additional or replacement financing
for working capital, capital expenditures, acquisitions and general
corporate purposes;
o a significant portion of our cash flow from operations must be used
to pay back the debt, which reduces the amount of cash we have
available for other purposes;
o we may be disadvantaged as compared to our competitors as a result
of the significant amount of debt we now owe;
o we may not be flexible to adjust to changing market conditions,
competition and decreases in the market and demand for our products
and services; and
o our debt and the covenants in our loan documents could limit our
ability to expand our business and take advantage of certain
business opportunities.
Our ability to pay the interest and principal on the secured line of
credit and the Debentures depends on our future operating performance, which is
affected by prevailing economic conditions, business activity levels, and other
factors, some of which are beyond our control. If we are unable to pay our debt,
we could be forced to pursue one or more alternative strategies such as selling
assets, curtailing any plans for expansion, restructuring or refinancing our
debt, or seeking additional equity or debt funding. We cannot assure you that
any of these strategies could be effected on terms satisfactory to us, if at
all.
OUR LIMITED REVENUE AND SIGNIFICANT LOSSES MAY CONTINUE FOR THE FORESEEABLE
FUTURE.
We have generated limited revenue and significant losses. For the years
ended December 31, 1999 and 1998, respectively, we generated revenues of
$7,270,080 and $8,027,948 and incurred losses of $8,473,674 and $9,366,693. We
expect losses to continue for the foreseeable future. Our future revenues and
profits or losses could be influenced by factors beyond our control such as
technological changes and developments, downturns in the economy and decreases
in the desktop video conferencing or personal computing industries or in
targeted commercial markets. We may not be able to successfully implement our
marketing strategy, generate significant revenues or become profitable.
As of December 31, 1999, we had substantial net operating loss carry
forwards for federal income tax purposes available to offset future taxable
income. Under Section 382 of the Internal Revenue Code of 1986, as amended, the
use of prior net operating loss carry forwards is limited after certain changes
in ownership percentages of our company. If we become profitable, any
significant limit on the use of our net operating loss carry forwards would
increase our tax liability and reduce net income and available cash.
IF OUR PRODUCTS DO NOT KEEP PACE WITH RAPIDLY CHANGING TECHNOLOGY AND EVOLVING
INDUSTRY STANDARDS, WHICH ARE CHARACTERISTIC OF THE MARKET FOR OUR PRODUCTS, WE
MAY BE ADVERSELY EFFECTED.
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The markets for our products are characterized by rapidly changing
technology and evolving industry standards. These factors result in product
obsolescence or short product life cycles. Our ability to compete will depend in
large part on our ability to:
o successfully introduce new products in a timely manner;
o continually enhance and improve our systems and software products;
o maintain development capabilities;
o anticipate or adapt to technological changes and advances in the
video communication and personal computing industries; and
o ensure our products continue to be compatible with evolving
industry standards.
If we are unable to successfully meet these challenges, we may have to
discontinue sales of our products until we can modify or redesign them, which
would decrease profits.
FLUCTUATIONS IN OPERATING RESULTS COULD CONTINUE IN THE FUTURE.
Our operating results may vary from period to period as a result of:
o the length of our sales cycle;
o the purchasing patterns of potential customers;
o the timing of the introduction of new products;
o software applications and product enhancements by us and our
competitors;
o technological factors;
o variations in sales by distribution channels;
o the timing of stocking orders by resellers;
o competitive pricing; and
o generally nonrecurring system sales.
Our sales order cycle ranges from one to eighteen months, depending on
the customer. The period of time from when a purchase order is executed until we
recognize revenue, may range from approximately one to four months. These
factors may cause significant fluctuations in operating results from period to
period.
WE NEED SIGNIFICANT CAPITAL TO OPERATE OUR BUSINESS AND MAY REQUIRE ADDITIONAL
FINANCING. IF WE CANNOT OBTAIN SUCH ADDITIONAL FINANCING, WE MAY NOT BE ABLE TO
CONTINUE OUR OPERATIONS.
We need a significant amount of capital to design, develop and market
our products. Our current level of funds may not be enough to fund operations
and growth. We believe that we have sufficient cash, cash equivalents and
marketable securities on hand to meet our operating working capital requirements
for the next twelve months. During the remainder of 2000, we expect to
significantly increase our sales, marketing and public relations efforts to
promote both our new and existing product offerings. Depending on future
business opportunities, product development, marketing requirements and sales
performance, our plans may change or prove to be inaccurate. If we are unable to
obtain additional financing, we may be required to curtail our activities.
Additional financing may dilute the ownership of our existing stockholders. Such
financing may include the issuance of convertible debt, convertible preferred
stock or other equity or debt securities.
THERE ARE INHERENT RISKS AS WE CONTINUE TO DEVELOP OUR PRODUCTS, WHICH MAY HAVE
MATERIALLY ADVERSE EFFECTS ON OUR OPERATIONS AND REVENUES.
We are dependent on the successful introduction, market acceptance,
manufacture and sale of new products that offer our customers additional
features and enhance current systems at competitive prices. Our products are
based on innovative technologies. As such, we face the risks inherent in the
development of new products based on innovative technologies. The development of
new products is subject to unanticipated delays, expenses, technical problems
and cost overruns, any one of which could result in abandonment or substantial
change in product commercialization. Our success in developing new products will
be largely dependent upon, among other things, our products meeting targeted
cost and performance objectives of large scale production, our ability to adapt
our products to satisfy industry standards and the timely introduction of our
products into the marketplace. There can be no assurance that, upon wide scale
commercial introduction, our new products and software applications will satisfy
current price or performance objectives, that unanticipated technical or other
problems resulting in increased costs or material delays in
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introduction and commercialization will not occur, or that our current products
and our future products will prove to be sufficiently reliable or durable under
actual operating conditions or otherwise be commercially viable. Software and
other technologies as complex as those incorporated into our systems may contain
errors which become apparent subsequent to widespread commercial use. Remedying
such errors could delay our plans and cause us to incur additional costs, having
a materially adverse impact on us.
IF WE CANNOT SUCCESSFULLY MARKET ALL OF OUR PRODUCTS, LOSSES WILL CONTINUE OR
INCREASE.
Our ability to make profits depends on our successful marketing of our
products. Some of the new products that we may develop may require greater
marketing efforts and expense to successfully introduce and market those
products. We may encounter the risks, expenses, delays, problems and
difficulties frequently experienced when shifting from development to marketing
of a product. Our products use software and other technologies which are complex
and may contain errors which may become apparent upon widespread commercial use.
If unanticipated expenses, problems or difficulties, technical or otherwise,
prevent us from successfully marketing our products, we will continue to
experience losses, perhaps at an increasing level.
WE MAY HAVE TO SPEND SUBSTANTIAL TIME AND EXPENSE MARKETING OUR PRODUCTS DUE TO
THE LIMITED MARKET ACCEPTANCE OF VIDEO COMMUNICATIONS SYSTEMS.
The higher cost and lower quality of video communications systems,
compared to television broadcast, have limited the market acceptance of video
communication systems. In order to successfully market our products, we may have
to spend substantial money, time and effort to increase awareness of the
benefits and distinctive characters of our products and generate demand.
IF WE CANNOT SUCCESSFULLY EXPAND OUR OPERATIONS, WE WILL CONTINUE TO INCUR
SIGNIFICANT LOSSES.
In order to successfully expand our operations we must have successful
products, hire and retain skilled management, marketing, technical and other
personnel, develop and maintain an effective sales organization, enter into
satisfactory marketing arrangements, secure adequate sources of supply on a
timely basis and on commercially reasonable terms and successfully manage growth
(including monitoring operations, controlling costs and maintaining effective
quality controls).
We may also seek to expand our operations through acquisitions. It is
possible that you may not have an opportunity to evaluate the specific merits or
risks of any potential acquisition. If we cannot successfully increase our sales
and operations or if we remain largely dependent on a limited customer base, we
will continue to incur significant losses.
WE COULD EXPERIENCE INCREASED LOSSES DUE TO POTENTIAL CREDIT LOSSES.
Most of our sales are made to customers on an open account basis with
no collateral required. We perform ongoing credit evaluations of our customers
and maintain reserves for potential credit losses. Although we have not had
losses which have exceeded management's expectations, there is the potential
that credit losses may exceed the amount reserved for such losses, which would
harm our profitability and cause increased losses in the future.
THE EFFECT OF A RECENT ACCOUNTING PRONOUNCEMENT ON OUR REVENUES AND EARNINGS IS
UNDER EVALUATION BY OUR MANAGEMENT.
In June 1998, the Financial Accounting Standard Board issued Financial
Accounting Standards ("FAS") 133, Accounting for Derivative Instruments and
Hedging Activities, which is effective for our company in our fiscal year 2001.
This statement establishes a new model for accounting for derivatives and
hedging activities. FAS 133 establishes methods of accounting for derivative
financial instruments and hedging activities related to those instruments as
well as other hedging activities. We are currently evaluating what effect, if
any, adoption of FAS 133 can be expected to have on our financial condition or
results of operating.
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OUR VIDEO COMMUNICATIONS INDUSTRY IS HIGHLY COMPETITIVE.
The market for video communications systems and products is highly
competitive. Our competitors are frequently introducing new products based on
innovative technologies. We compete with numerous well-established manufacturers
and suppliers of video conferencing, networking, telecommunications and
multimedia equipment and products. Most of our competitors possess substantially
greater financial, marketing, personnel and other resources than we do, have
established reputations relating to product design, development, manufacture,
marketing and service, and have significant budgets to permit them to implement
extensive advertising and promotional campaigns to market new products in
response to competitors. These factors may materially and adversely affect our
competitive position.
Some of our direct competitors are Zydacron, Inc., VCON, Ltd., Winnov,
L.P., First Virtual Corporation, Picturetel Corporation, Video Network
Communications, Inc., VTEL Corporation, Pinnacle Systems, Inc., Tandberg Inc.,
and Polycom, Inc. In addition, electronics manufacturers such as Intel Corp. and
Cisco Systems, Inc. also actively compete for business in this market. Our
ability to become profitable depends upon our success competing against or
forming appropriate alliances with these competitors.
WE DEPEND ON THE EFFORTS OF THIRD PARTY RESELLERS, MANUFACTURERS AND SUPPLIERS.
THESE RELATIONSHIPS MAY NOT CONTINUE.
We use a network of resellers, consisting primarily of value-added
resellers, systems integrators and original equipment manufacturers with
established distribution channels to assist with the marketing of our products
and installation and servicing of our systems. Our future profits or losses
depend on our ability to maintain old relationships and develop new
relationships with value-added resellers, systems integrators and original
equipment manufacturers, and on their marketing efforts and installation and
support services. A decline in the financial prospects of particular resellers
or any of their customers, inadequate installation and support services by
resellers or our inability to contract with additional resellers could damage
our profitability or cause additional losses.
We also depend on contract manufacturers to supply our products in
limited quantities pursuant to purchase orders. Our products may not be able to
be manufactured reliably on a large scale basis on commercially reasonable
terms. We have been and will continue to be dependent on third parties for the
supply and manufacture of all of our component and electronic parts, including
standard and custom-designed components. We purchase components and electronic
parts pursuant to purchase orders in the ordinary course of business and do not
maintain supply agreements. We are substantially dependent on the ability of
third-party manufacturers and suppliers to meet our design, performance and
quality specifications. If our third-party manufacturers or suppliers cannot
supply us with systems or parts within our timeframes or allocate the supply of
certain high demand components, we could be unable to meet our delivery
schedules and requirements on a timely and competitive basis, which would harm
our operations.
WE ARE SUBJECT TO GOVERNMENT REGULATION WHICH COULD RESULT IN MATERIALLY ADVERSE
BURDENS ON OUR COMPANY.
We are subject to government regulations relating to electromagnetic
radiation from our products. As we redesign or otherwise modify our products or
complete the development of new products, we are required to comply with Federal
Communications Commission regulations. There can be no assurance that all of our
products will comply with such regulations. In addition, new legislation and
regulations, and revisions to existing laws and regulations at the federal,
state and local levels which affect the video communications industry may be
proposed in the future. New or revised regulations could affect our operations,
result in material capital expenditures, affect the marketability of our
products and limit opportunities for us. Our foreign markets also require us to
comply with different regulatory requirements.
Our products may be subject to U.S. technology export controls. These
export controls could delay introduction of new products or limit our ability to
distribute outside of the U.S. Various countries may regulate the import of
certain technologies contained in our products. Such export or import
restrictions, new legislation or
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regulation or government enforcement of existing regulations could have a
materially adverse effect on our business, operating results and financial
condition. There can be no assurance that we will be able to comply with
additional applicable laws and regulations without excessive cost or business
interruption, if at all, and failure to comply could have a similarly material
adverse effect.
WE HAVE A SMALL CUSTOMER BASE.
We make a substantial portion of our sales to a small number of
customers. A loss of one or more of these customers may result in lower revenues
and increased losses.
OUR SUCCESS IS DEPENDENT ON OUR ABILITY TO RETAIN KEY PERSONNEL.
The development and management of our business and growth depends on the efforts
of our key personnel. Key personnel include George C. Platt-President and Chief
Executive Officer, Laurie L. Latham-Chief Financial Officer, Harry E.
Bruner-Senior Vice President of Sales and Marketing, Frederick B. Cowen-Vice
President-Controller, David T. Stoner-Vice President of Operations and Neal S.
Page-Vice President and General Manager of Osprey. All key employees, with the
exception of Mr. Platt, who has executed an 18-month employment contract, are
"at-will" employees. Each "at will" employee may quit or be terminated at any
time, for any reason or no reason. The loss of one or more of our key employees
could materially and adversely affect us. Our future success also depends on our
ability to effectively attract, retain, train and manage qualified operational,
financial, technical, marketing, sales and other personnel.
OUR INABILITY TO PROTECT OUR PATENTS, TRADEMARKS AND PROPRIETARY INFORMATION
COULD HARM OUR PROFITABILITY.
We hold a U.S. patent covering certain aspects of our compression
packet video codec. We have registered trademarks for the WorkFone(R),
Osprey(R), ViewCast(R), Viewpoint Pro(R), Personal Viewpoint(R), Multimedia
Access System(R), Call Wizard(R), Compressed Pocket Video (CPV)(R) and
SLIC-Video(R) names and have applied for trademark registration for the
YourVideoOnTheWeb(TM), Viewpoint VBX(TM), QVideo(TM), Mediapoint(TM), Conference
Wizard(TM), Envista(TM), and Viewport(TM) names.
If our current or future patents, trademarks or proprietary information
cannot be adequately protected or if competitors develop similar or superior
methods or products outside the protection of any patent issued to us, we will
be adversely effected. If we infringe on the patents or the proprietary rights
of others, we may be required to modify our product designs, change our product
names, obtain a license for certain technology or become liable for damages, all
of which could decrease our profits.
RECENT VOLATILITY ON THE NASDAQ COULD ADVERSELY AFFECT THE TRADING PRICE OF OUR
COMMON STOCK AND PUBLIC WARRANTS.
Publicly traded equity securities, including our common stock and
Public Warrants, have recently experienced substantial market price volatility.
These market fluctuations may be unrelated to the operating performance of
particular companies whose securities are traded. The trading price of our
common stock and Public Warrants is determined by the marketplace and may be
influenced by many factors, other than investor perception of us, such as
general industry and economic conditions. The trading price of our common stock
and Public Warrants may continue to be subject to these volatile market
conditions.
THE OWNERSHIP INTERESTS OF CURRENT STOCKHOLDERS COULD BE SIGNIFICANTLY DILUTED
BY THE EXERCISE OF OUTSTANDING WARRANTS AND OPTIONS OR THE CONVERSION OF SERIES
B PREFERRED STOCK OR THE DEBENTURES.
As of May 31, 2000, there were outstanding stock options to purchase
approximately 2,849,064 shares of common stock at exercise prices ranging from
$1.7656 to $9.00 per share; redeemable warrants to purchase 4,097,859 common
shares at $4.19 per share; non-redeemable warrants to purchase 1,074,468 common
shares at exercise prices ranging from $3.00 to $6.30 per share; Series B
Preferred Stock convertible into 2,606,896 common shares at $3.625 per share;
and $4.45 million principal amount of Debentures convertible as of the date of
this prospectus into 988,889 common shares at $4.50 per share. The percentage
ownership of common stock of our stockholders will be diluted to the extent
outstanding options and warrants are exercised and Series B Preferred Stock and
Debentures are converted.
10
<PAGE> 11
CERTAIN PROVISIONS OF OUR CHARTER AND DELAWARE LAW MAY HAVE ANTI-TAKEOVER
EFFECTS.
Certain articles in our Certificate of Incorporation, as amended, and
our ability to issue up to 5,000,000 shares of "blank check" preferred stock may
discourage proposals by third parties to acquire a controlling interest in
ViewCast. These factors could deprive stockholders of the opportunity to
consider an offer to acquire their shares at a premium. Under certain
conditions, Section 203 of the Delaware General Corporate Law would impose a
three-year waiting period on certain business combinations between us and a
stockholder owning 15% or more of our voting stock. The existence of these
provisions and laws may depress the market price of our common stock and Public
Warrants.
IF OUR COMMON STOCK OR PUBLIC WARRANTS ARE DELISTED FROM NASDAQ, INVESTORS MAY
NOT BE ABLE TO SELL THEIR COMMON STOCK OR PUBLIC WARRANTS AT AN ACCEPTABLE PRICE
OR AT ALL.
Our common stock and Public Warrants are quoted on the NASDAQ SmallCap
Market. In order to continue to be listed on NASDAQ, we must maintain, among
other criteria,
o $2,000,000 in net tangible assets, $35,000,000 market capitalization
or $500,000 in net income for two of the prior three years;
o a public float of at least 500,000 shares;
o a market value of public float of at least $1 million;
o at least 300 shareholders;
o two market-makers; and
o a minimum bid price of $1.00 per share.
Our failure to meet these maintenance criteria in the future may result
in the delisting of our common stock and Public Warrants from NASDAQ. In the
event that our common stock or Public Warrants were delisted, any trading in the
common stock or Public Warrants would be conducted in the over-the-counter
market, in the so-called "pink sheets" or the "Electronic Bulletin Board" of the
National Association of Securities Dealers, Inc. As a result of such delisting,
you could find it more difficult to sell, or to obtain accurate quotes for our
common stock and Public Warrants.
NO DIVIDENDS HAVE BEEN PAID OR ARE EXPECTED TO BE PAID ON OUR COMMON STOCK.
We have not paid any cash dividends on our common stock and do not
expect to do so in the foreseeable future. Certain of our debt agreements
require the consent of the lender before we can pay dividends. We cannot assure
you that if we decide to pay cash dividends on our common stock we will be able
to obtain the necessary consents.
THE RELATIONSHIP OF THE REPRESENTATIVE OF THE UNDERWRITERS IN OUR INITIAL PUBLIC
OFFERING TO TRADING IN OUR COMMON STOCK AND PUBLIC WARRANTS COULD IMPAIR THE
LIQUIDITY AND MARKET PRICE OF OUR COMMON STOCK AND PUBLIC WARRANTS.
Network 1 Financial Securities, Inc. ("Network 1") was the
representative of the underwriters in our initial public offering and is a
selling securityholder under the prospectus. See "Selling Securityholders".
Network 1 has the right the right to act as our exclusive agent in connection
with any future solicitation of Public Warrant holders to exercise their Public
Warrants. Unless granted an exemption by the SEC from Regulation M under the
Exchange Act, Network 1 will be prohibited from engaging in any market-making
activities or solicited brokerage activities with regard to our securities
during a period beginning five business days (or such other applicable periods
as Regulation M may provide) prior to the commencement of any such solicitation
and ending on the later of the termination of the solicitation activity or the
termination (by waiver or otherwise) of any right Network 1 may have to receive
a fee for the exercise of the Public Warrants following such solicitation.
Additionally, as a selling securityholder, Network 1 will, during any sales by
it under this prospectus of Public Warrants held by it, be prohibited from
engaging in any market-making activities or solicited brokerage activities with
regard to our common stock and Public Warrants during a period beginning five
business days prior to the commencement of any sales by Network 1 under this
prospectus and ending on Network 1's completion of its sales under this
prospectus. The limitation of Network 1 to continue to make a market in our
securities during these periods could impair the liquidity and market price of
our securities.
THE PUBLIC WARRANTS ARE REDEEMABLE AT A NOMINAL PRICE, AND A CALL FOR REDEMPTION
COULD FORCE EXERCISE OF THE PUBLIC WARRANTS, WHICH COULD IMPAIR THE MARKET PRICE
OF OUR COMMON STOCK.
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<PAGE> 12
We may redeem all, but not less than all, of the Public Warrants, at
any time, upon notice of not less than thirty (30) days, at a price of $.10 per
Public Warrant, provided that the per share closing price or bid quotation of
our common stock, as reported on NASDAQ, for any twenty trading days within a
period of thirty consecutive trading days, ending on the fifth day prior to the
day on which we give notice of redemption, has been at least 150% (currently
$6.75, subject to adjustment) of the initial public offering price per share of
our common stock (which was $4.50). Our redemption of the Public Warrants could
force the holders to (1) exercise the Public Warrants and pay the exercise price
at a time when it may be disadvantageous for the holders to do so, (2) sell the
Public Warrants at the then current market price when they might otherwise wish
to hold the Public Warrants, or (3) accept the redemption price, which is likely
to be substantially less than the market value of the Public Warrants at the
time of redemption. In the event of the exercise of a substantial number of
Public Warrants within a reasonably short period of time after the right to
exercise commences, the resulting increase in the amount of our common stock in
the trading market could substantially affect the market price of the common
stock.
THERE ARE LEGAL RESTRICTIONS ON SALES OF SHARES OF OUR COMMON STOCK UNDERLYING
THE PUBLIC WARRANTS.
The Public Warrants are not exercisable unless, at the time of the
exercise, we have filed with the SEC a current prospectus covering the shares of
common stock issuable upon exercise of the Public Warrants, and such shares have
been registered, qualified or deemed to be exempt under the securities laws of
the state of residence of the exercising holder of the Public Warrants. Although
we have agreed to keep a registration statement covering the shares of common
stock issuable upon the exercise of the Public Warrants effective for the term
of the Public Warrants, if we fail to do so for any reason, the Public Warrants
may be deprived of value. Our common stock and the Public Warrants are
separately transferable immediately upon issuance. Purchasers may buy Public
Warrants in the after-market or may move to jurisdictions in which the shares
underlying the Public Warrants are not registered or qualified during the period
that the Public Warrants are exercisable. In this event, we would be unable to
issue shares to those persons desiring to exercise their Public Warrants, and
holders of Public Warrants would have no choice but to attempt to sell the
Public Warrants in a jurisdiction where such sale is permissible or allow them
to expire unexercised.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference into this
prospectus contain certain forward-looking statements. These statements relate
to future events or future financial performance and involve known and unknown
risks, uncertainties and factors that may cause our, or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. These
risks, uncertainties and other factors include those listed under "Risk Factors"
on page 6, or elsewhere in this prospectus, and include those contained in
documents incorporated by reference containing the management discussion and
analysis of our financial condition and results of operation and the description
of our business and other matters pertaining to our company. In some cases, you
can identify forward-looking statements by terminology such as "may", "will",
"should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential", "continue", or the negative of these terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially. In evaluating these statements, you should
specifically consider various factors including the factors outlined under "Risk
Factors" set forth in this prospectus. These factors can cause our actual
results to differ materially from any forward-looking statement. All
forward-looking statements made in this prospectus are made as of the date of
this prospectus, and all forward-looking statements set forth in any document
incorporated by reference into this prospectus are made as of the date of filing
of those documents with the SEC. We assume no obligation to update
forward-looking statements.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of our common
stock or Public Warrants by the selling securityholders under this prospectus.
DESCRIPTION OF PUBLIC WARRANTS
The following is a brief summary of certain provisions of the Public
Warrants. This summary is not complete and is qualified in all respects by
reference to the actual text of the Warrant Agreement (the "Warrant Agreement")
between us and Continental Stock Transfer & Trust Company (the "Warrant Agent").
The Warrant Agreement is an exhibit to the registration statement of which this
prospectus is a part. The Public Warrants covered by this prospectus
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<PAGE> 13
are, as of the date of this prospectus, issuable upon exercise of certain
private warrants. There are, as of the date of this prospectus, 2,598,848 Public
Warrants currently issued and outstanding.
EXERCISE AND TERMS; EXPIRATION.
Each Public Warrant entitles the registered holder to purchase, at any
time prior to the earlier of redemption or the expiration date of the Warrant,
1.074 share of common stock at $4.50 per share subject to adjustment in
accordance with the anti-dilution and other provisions. Public Warrants may be
exercised, in whole or in part, by surrendering the certificate representing the
Public Warrant to the Warrant Agent, with the subscription form thereon properly
completed and executed, together with payment of the exercise price. Fractional
shares of our common stock will not be issued upon the exercise of Public
Warrants. There is no relationship between the exercise price of the Public
Warrants and any objective criteria of value. The exercise price of the Public
Warrants should not be regarded as an indication of any future trading prices of
shares of our common stock. Unless earlier redeemed, the Public Warrants expire
at 5:30 p.m. (New York time) on February 3, 2002, at which time they are no
longer exercisable.
ADJUSTMENTS.
Upon the occurrence of certain events, the exercise price and the
number of shares of our common stock purchasable upon the exercise of the Public
Warrants are subject to certain anti-dilution adjustments. The events include
stock dividends, stock splits, combinations or reclassification of our common
stock and sale of shares of our common stock or other securities convertible
into our common stock at a price below the exercise price of the Public
Warrants.
Additionally, in the event of:
o reclassification or exchange of our common stock,
o consolidation or merger of our company with or into another
corporation (other than a consolidation or merger in which we are
the surviving corporation), and
o sale of all or substantially all of the assets of our company,
the Public Warrants are adjusted so that the holders have the right to receive
on the exercise of the Public Warrants the kind and number of shares of stock or
other securities or property receivable in any such event by a holder of the
number of shares of our common stock issuable upon exercise of the Public
Warrants immediately prior to such event.
REDEMPTION PROVISIONS.
We may redeem all, but not less than all, of the Public Warrants, upon
notice of not less than thirty days, at a price of $.10 per Public Warrant,
provided that the per share closing price or bid quotation of our common stock
as reported on NASDAQ, for any twenty trading days within a period of thirty
consecutive trading days, ending on the fifth day prior to the day on which we
give notice of redemption, has been at least 150% (currently $6.75, subject to
adjustment) of the initial public offering price per share of our common stock
(which was $4.50). The Public Warrants will be exercisable until the close of
business on the day immediately preceding the date fixed for redemption in such
notice. If any Public Warrant called for redemption is not exercised prior to
that time, it ceases to be exercisable, and the holder will be entitled only to
the redemption price.
TRANSFER, EXCHANGE AND EXERCISE.
The Public Warrants are in registered form and may be presented to the
Warrant Agent for transfer, exchange or exercise at any time on or prior to
their exercise, expiration or redemption. If a market for the Public Warrants
exists, the holder may sell the Public Warrants instead of exercising them.
There can be no assurance, however, that a market for the Public Warrants will
continue. The Public Warrants are not exercisable unless, at the time of the
exercise, we have a current prospectus covering the shares of common stock
issuable upon exercise of the Public Warrants, and the shares have been
registered, qualified or are exempt under the securities laws of the state of
residence of the exercising holder of the Public Warrants. Although we have a
current prospectus covering the shares, and we will use our best efforts to
register or qualify all shares of our common stock issuable upon exercise of the
Public Warrants on or before the exercise date and to maintain a current
prospectus relating thereto until the expiration of the Public Warrants, there
can be assurance that we will be able to do so. The Public Warrants are
separately transferable immediately upon issuance. Although the Public Warrants
will not knowingly be sold to purchasers in jurisdictions in which the Public
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<PAGE> 14
Warrants are not registered or otherwise qualified for sale or exemption,
purchasers may buy Public Warrants in the after-market in, or may move to
jurisdictions in which Public Warrants and our common stock underlying the
Public Warrants are not so registered or qualified or exempt. In this event, we
would be unable lawfully to issue common stock to those persons desiring to
exercise their Public Warrants (and the Public Warrants would not be exercisable
by those persons) unless and until the Public Warrants and the underlying common
stock are registered, or qualified for sale in jurisdictions in which such
purchasers reside, or any exemption from registration or qualification exists in
such jurisdiction.
WARRANTHOLDER NOT A STOCKHOLDER.
The Public Warrants do not confer upon holders any voting, dividend or
other rights as stockholders of our company.
MODIFICATION OF PUBLIC WARRANTS.
We and the Warrant Agent may make such modifications to the Public
Warrants as we deem necessary and desirable that do not adversely affect the
interests of the warrantholders. We may, in our sole discretion, lower the
exercise price of the Public Warrants for a period of not less than thirty (30)
days on not less than thirty (30) days' prior written notice to the
warrantholders and Network 1. The number of securities purchasable upon the
exercise of any Public Warrant may not be modified without the consent of
two-thirds of the warrantholders. No other modifications may be made to the
Public Warrants without the consent of two-thirds of the warrantholders.
NETWORK 1 AS SOLICITATION AGENT FOR EXERCISE OF PUBLIC WARRANTS.
Upon the exercise of any Public Warrants more than one year after the
date of the prospectus for our initial public offering (February 1997), if the
exercise was solicited by Network 1, and to the extent not inconsistent with the
guidelines of the NASD and the rules and regulations of the SEC, we have agreed
to pay Network 1 a commission not to exceed five percent of the aggregate
exercise price of the Public Warrants in connection with bona fide services
provided by Network 1 relating to any warrant solicitation. In addition, the
individual must designate the firm entitled to payment of the warrant
solicitation fee. However, no compensation will be paid to Network 1 in
connection with the exercise of the Public Warrants if (1) the market price of
our common stock is lower than the exercise price, (2) the Public Warrants were
held in a discretionary account, or (3) the Public Warrants are exercised in an
unsolicited transaction. Unless granted an exemption by the SEC from Regulation
M under the Exchange Act, Network 1 will be prohibited from engaging in any
market-making activities with regard to our securities for the period from five
business days (or other such applicable periods as Regulation M may provide)
prior to any solicitation of the exercise of the Public Warrants until the later
of the termination of the solicitation activity or the termination (by waiver or
otherwise) of any right Network 1 may have to receive a fee for soliciting the
exercise of the Public Warrants. Additionally, as a selling securityholder under
this prospectus, Network 1 will, during any sales by it under this prospectus of
Public Warrants held by it, be prohibited from engaging in any market-making
activities or solicited brokerage activities with regard to our common stock and
Public Warrants during a period beginning five business days prior to the
commencement of any sales by Network 1 of Public Warrants under this prospectus
and ending on Network 1's completion of its sales under this prospectus. As a
result, Network 1 may be unable to continue to provide a market for our
securities during these certain periods. If Network 1 has engaged in any of the
activities prohibited by Regulation M during the periods described above,
Network 1 undertakes to waive unconditionally its right to receive a commission
on the exercise of the Public Warrants.
SELLING SECURITYHOLDERS
AS TO THE SHARES OF OUR COMMON STOCK REGISTERED UNDER THIS PROSPECTUS, THE
SELLING SECURITYHOLDERS ARE:
o RP&C International (Guernsey) Limited ("RPC"), and the permitted
assignees of RPC of the private warrant initially issued to RPC
who exercise such warrants and become holders of the underlying
shares of our common stock;
o Holders of up to 988,889 shares of our common stock issuable as of
the date of this prospectus upon conversion of our $4.45 million
principal amount of 7% Senior Convertible Debentures Due 2004 (the
"Debentures"); and
o Haynes and Boone, LLP, our legal counsel.
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<PAGE> 15
o Richard W. Hunt
o William R. Hunt
o Kenneth Spencer
o Damon D. Testaverde
AS TO THE PUBLIC WARRANTS REGISTERED UNDER THIS PROSPECTUS, THE SELLING
SECURITYHOLDERS ARE:
o Network 1 Financial Securities, Inc. ("Network 1")
o Richard W. Hunt
o William R. Hunt
o Kenneth Spencer
o Damon D. Testaverde
We issued and sold the Debentures pursuant to a Trust Indenture dated
as of April 28, 2000, between our company and HSBC Bank USA, as Trustee. The
Debentures were issued and sold in compliance with Regulation S under the
Securities Act. The shares of our common stock to be sold under the prospectus
that are issuable upon conversion of the Debentures will be issued to the
holders of the Debentures as restricted securities under the Securities Act in
compliance with Regulation S. The selling securityholders of these shares will
either be holders of the converted Debentures or transferees of the shares
issued upon conversion of the Debentures in transactions exempt from the
registration provision of the Securities Act. Because the Debentures are in
bearer form, we are unable to identify the holders. The names of these selling
securityholders will not be known until the time of the sale.
RPC and its permitted assignees are selling 89,000 shares of our common
stock under this prospectus. These shares are issuable upon exercise of a
warrant we issued to RPC as part of the compensation to affiliates of RPC as
lead managers of our offering and sale of the Debentures (the "RPC Warrant").
RPC may assign the warrant, in whole or in part, to certain successors,
affiliates, agents, stockholders, partners, and nominees, who may exercise the
warrant and be a selling securityholder under this prospectus. The RPC Warrant
becomes exercisable April 28, 2001. Affiliates of RPC were lead managers in 1997
of our offering and sale of $5.0 million principal amount of 8% Senior
Convertible Notes due 2002.
We issued 2,500 shares of our common stock to Haynes and Boone, LLP, at
a purchase price of $6.00 per share, in partial payment of the legal fees we
incurred for the services of Haynes and Boone, LLP, as our counsel in the
offering and sale of the Debentures. Haynes and Boone, LLP was our legal counsel
in our offering and sale in 1997 of $5.0 million principal amount of 8% Senior
Convertible Notes due 2002 and has performed various other general legal
services for us during the last three years.
The Public Warrants registered under this prospectus are issuable, as
of the date of this prospectus, upon exercise of private warrants
("Representative's Warrants") we issued and sold in February 1997 to Network 1.
Network 1 was the representative of the underwriters for the initial public
offering of our common stock in February 1997. We issued the Representative's
Warrants to Network 1 as part of its compensation for its services as
representative in our initial public offering. Richard W. Hunt, William R. Hunt,
Kenneth Spencer, and Damon D. Testaverde are holders of certain of the
Representative's Warrants, as transferees of Network 1. Each of these
individuals were affiliates of Network 1 at the time of the transfer.
Up to 254,065 shares of our common stock included in this prospectus
are issuable to the following selling securityholders upon exercise of certain
of the Representative's Warrants owned by such selling securityholders and upon
exercise of certain of the Public Warrants covered by this prospectus:
<TABLE>
<CAPTION>
Selling Securityholder Shares Issuable
<S> <C>
Richard W. Hunt 54,442
William R. Hunt 54,442
Kenneth Spencer 36,295
Damon D. Testaverde 108,885
</TABLE>
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<PAGE> 16
The following table sets forth information known to us with respect to
the beneficial ownership of each RPC, Haynes and Boone, LLP, Richard W. Hunt,
William R. Hunt, Kenneth Spencer, and Damon D. Testaverde of our common stock,
and of Network 1, Richard W. Hunt, William R. Hunt, Kenneth Spencer, and Damon
D. Testaverde, of our Public Warrants, before and after completion of the sale
of the securities to be sold by him or it under this prospectus. The information
included in the table as to these entities and individuals has been furnished to
us by the entity or person related to the information for inclusion in this
prospectus. The information is based upon the assumption that the selling
securityholder does not sell any securities shown in the table as beneficially
owned other than the securities to be sold under this prospectus and that the
selling securityholder of Public Warrants either sells all of the Public
Warrants, without exercising any of them, or exercises all of them and sells all
of the underlying shares. We have determined beneficial ownership in accordance
with the rules of the SEC. The number of shares of our common stock shown as
beneficially owned includes shares underlying warrants currently exercisable or
exercisable within 60 days of June 29, 2000. These shares are deemed outstanding
for purposes of computing the number of shares beneficially owned and percentage
beneficial ownership. Because the 89,000 shares of our common stock to be sold
by RPC under this prospectus are not issuable under the RPC Warrant until April
28, 2001, the 89,000 shares are not shown in the table as beneficially owned by
RPC. The percentage beneficial ownership of each of the entities and individuals
shown in the table of our shares of common stock or Public Warrants, as
applicable, is less than 1%.
<TABLE>
<CAPTION>
Number of Securities Number of Securities
Beneficially Owned Beneficially Owned After
Name Before Sale Securities to be Sold Sale
---------------------- --------------------------- ------------------------- -------------------------
<S> <C> <C> <C>
RP&C International
(Guernsey) Limited 113,458 Shares(1) 89,000 Shares 113,458 Shares
Haynes and Boone, LLP 2,500 Shares 2,500 Shares 0 Shares
Network 1 Financial 17,500 Public Warrants 17,500 Public Warrants 0 Public Warrants
Securities, Inc.
Richard W. Hunt 26,250 Public Warrants 26,250 Public Warrants 0 Public Warrants
(or 28,192 Shares)
54,442 Shares(2) and 26,250 Shares 0 Shares
William R. Hunt 26,250 Public Warrants 26,250 Public Warrants 0 Public Warrants
(or 28,192 Shares)
54,442 Shares(2) and 26,250 Shares 0 Shares
Kenneth Spencer 17,500 Public Warrants 17,500 Public Warrants 0 Public Warrants
(or 18,795 Shares)
36,295 Shares(2) and 17,500 Shares 0 Shares
Damon D. Testaverde 52,500 Public Warrants 52,500 Public Warrants 0 Public Warrants
(or 56,385 Shares)
108,885 Shares(2) and 52,500 Shares 0 Shares
</TABLE>
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<PAGE> 17
----------
(1) Includes 59,888 shares directly owned and 53,570 shares issuable upon
exercise of private warrants held by RPC.
(2) Represents shares issuable upon exercise of private warrants and the
Public Warrants included in this prospectus owned by the selling
security holder.
PLAN OF DISTRIBUTION
The securities to be sold under this prospectus will be sold by the
selling securityholders. We will not receive any proceeds from the sale of any
of the securities. The securities may be sold from time to time by the selling
securityholders, or by pledgees, donees, transferees, or other successors in
interest to the selling securityholders. Such sales may be made on one or more
exchanges or in the over-the-counter market, including the NASDAQ SmallCap
Market or otherwise at prices and at terms then prevailing or at prices related
to the then current market price or in negotiated transactions. The securities
may be sold by one or more of the following:
o a block trade, in which the broker or dealer will attempt to sell
the shares of common stock or Public Warrants as agent but may
position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus;
o an exchange distribution in accordance with the rules of such
exchange; and
o ordinary brokerage transactions and transactions in which the
broker solicits purchasers.
In effecting sales by the selling securityholders, brokers or dealers
engaged by the selling securityholders may arrange for other brokers or dealers
to participate. Brokers or dealers may receive commissions or discounts from the
selling securityholders in amounts to be negotiated immediately prior to the
sale. In addition, underwriters or agents may receive compensation in the form
of discounts, concessions or commissions, from the selling securityholders or
from purchasers of the securities sold by the selling securityholders for whom
they may act as agents. Underwriters may sell shares of common stock or Public
Warrants to or through dealers, who may receive compensation in the form of
discounts, concessions or commissions from the underwriters or commissions from
the purchasers as the purchaser's agents. The selling securityholders,
underwriters, brokers, dealers, and agents that participate in the sale of the
securities covered by this prospectus may be deemed to be "underwriters" within
the meaning of the Securities Act in connection with such sales. Any discounts
or commissions received by them from the selling securityholders and any profit
on the resale of the shares of common stock or Public Warrants by them may be
deemed to be underwriting discounts and commissions under the Securities Act. In
addition, securities covered by this prospectus which qualify for sale pursuant
to Rule 144 under the Securities Act may be sold under Rule 144 rather than
pursuant to this prospectus.
At the time a particular offer and sale of securities under this
prospectus is made, to the extent required, a supplement to this prospectus will
be distributed, which will identify and set forth the aggregate amount of shares
of common stock or Public Warrants being offered and sold and the terms of the
offer and sale. The supplement will disclose, to the extent required:
o the name of each selling securityholder and of the participating
underwriter, broker, dealer, or agent;
o the number of shares of common stock or Public Warrants to be
offered and sold;
o the price at which the shares of common stock or Public Warrants
are to be sold;
o any discounts, commissions and other compensation from the selling
securityholders;
o the commissions paid or discounts or concessions allowed or
re-allowed or paid to brokers or dealers, where applicable,
including the proposed selling price to the public; and
o any other facts material to the transaction.
We have agreed to indemnify all selling securityholders, other than
Haynes and Boone, LLP, and each person controlling a selling securityholder,
other than Haynes and Boone, LLP, within the meaning of the Securities Act in
certain circumstances against certain liabilities, including liabilities under
the Securities Act.
Selling securityholders and any other persons participating in the sale
or distribution of the securities covered by this prospectus will be subject to
the provisions of the Exchange Act and the rules and regulations thereunder,
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<PAGE> 18
including Regulation M to the extent applicable. Regulation M, with certain
exceptions, precludes any selling securityholder or other person participating
in the sale and distribution of the shares of common stock or Public Warrants
from bidding for or purchasing, or attempting to induce any person to bid for or
purchase, any security which is the subject of distribution until the entire
distribution is complete. Regulation M also prohibits any bids or purchases made
in order to stabilize the price of a security in connection with the
distribution of that security. The selling securityholders also must comply with
the applicable prospectus delivery requirements under the Securities Act in
connection with any sale of shares of common stock or Public Warrants under this
prospectus.
In order to comply with certain states' securities laws, if applicable,
the shares of our common stock and Public Warrants offered under this prospectus
will be sold only through registered or license brokers or dealers. In certain
states, the shares or Public Warrants may not be sold unless the shares or
Public Warrants have been registered or qualified for sale in such state, unless
an exemption from registration and qualification is available and is obtained.
We will bear all fees and expenses incurred in connection with the
registration of the shares of our common stock and Public Warrants covered by
this prospectus, including, without limitation, all registration and filing fees
imposed by the SEC, NASDAQ, and Blue Sky Laws, printing expenses, transfer
agents' and registrars' fees, and the fees and disbursements of our outside
counsel and independent public accountants and a designated counsel to sellers
of the shares of our common stock under this prospectus (excluding Haynes and
Boone, LLP). The selling securityholders of our Public Warrants will pay the
legal fees and expenses incurred by us in connection with the registration of
the Public Warrants. Each selling securityholder under this prospectus will bear
all underwriting discounts and commissions and transfer or other taxes
applicable to his or its transaction.
We filed the registration statement related to this prospectus pursuant
to agreements between us and the selling securityholders in order to permit the
sale of shares of common stock and Public Warrants pursuant to this prospectus.
As to the shares issuable upon conversion of the Debentures and exercise of the
RPC Warrant, we have agreed to use all commercially reasonable efforts to keep
the registration statement continuously effective until (1) all of the
Debentures have been fully converted, the RPC Warrant has been fully exercised
and the shares covered by this prospectus have been sold or (2) the Debentures,
the RPC Warrant and the shares issuable upon conversion or exercise thereof no
longer constitute "restricted securities" within the meaning of Rule 144(a)(3)
under the Securities Act.
LEGAL MATTERS
The validity of the securities to be offered and sold under this
prospectus will be determined by Haynes and Boone, LLP. Haynes and Boone, LLP
owns 2,500 shares of our common stock and is a selling securityholder as to
those shares under this prospectus.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-KSB for the year
ended December 31, 1999, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
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